Richard Tomlinson, CIO of LPPI, joins Paul Kitson, head of UK pensions consulting at EY and Charlotte Moore, co-founder of Moore Squared Communications, for the sixth episode of EY’s Re-imagining Pensions Podcast.
While The Pensions Scheme Act is creating a lot of change throughout the whole industry, the Local Government Pension Scheme is under pressure. With the number of pools shrinking to six from eight, the remaining pools are having to expand the number of partner funds.
In addition, pools will need to start acting as the principal source of investment advice, as well as providing strategic asset allocations (SAA) for partner funds. They will also need to provide new local investment plans.
Richard says LPPI has been busy as it triples the number of partner funds to nine from three. He said pools will find acting as the principal source of investment advice as well as providing SAA will represent a strategic and cultural shift for many pools.
We unpacked how the strong tie between local authority pensions and local citizens means most pools a significant minority of their assets invested locally.
Richard explained how big is not always beautiful – that there are diseconomies of scale when it comes to investing.
He said there was no magic assets under management number – that the ability to invest across a wide universe assets was determined by how well that asset owner ran their team and had built the right culture.
We discussed the benefits of investing in private markets – with many companies choosing private financing over public financing, ignoring this part of the market meant not accessing the full economy.
Richard also talked about the strongest growth often happened when a company was formed so it is vital to access these companies when smaller. This can be difficult for large asset owners to achieve but working in partnership was vital for success.
This led us to a discussion about strategic partnerships and how we can expect these to develop between asset managers and owners in coming years.
Finally, Richard said he would use his magic wand to ask for a stable environment for pensions so schemes could focus on delivering benefits for members.
About the hosts:
Paul is a Partner and UK Head of Pensions Consulting at EY. He leads a team focused on advising pension funds and their corporate sponsors across the UK. Paul and has worked with some of the largest defined benefit and defined contribution pension funds in the UK including the British Airways Pension Schemes and the BBC.
Charlotte Moore is an award-winning journalist and co-founder of Moore Squared Communications. She has spent almost two decades writing about how the UK’s largest investment organisations allocate their capital for a number of different specialist magazines including Professional Pensions, IPE and MandateWire. She started this podcast to increase understanding of how and why the UK’s £3 trillion pensions industry invests its members’ capital to provide the best possible retirement.
Chapters:
00:00 Welcome and meet Richard Tomlinson of LPPI
01:34 The Pension Schemes Act and pool consolidation
04:44 Advice, strategic asset allocation and the fiduciary shift
08:00 Investing in the UK and fiduciary duty
13:00 The three R's and getting the mandate right
15:20 Is big always beautiful, scale and its limits
20:00 Private markets, the J curve and the partnership model
27:00 Finding the sweet spot and the magic wand
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